Hello BP,
I've found an interesting deal in my hometown of Waitsburg, Wa. which I would love your advice on. Please bear with me as I just stumbled on this last night and am still learning about the property myself. This will probably be long-winded to give you all some history and market context:
I met an older couple (mid-70s) last summer at a church hosted drive-in movie. I talked with him for an hour or so and learned they own a 5 unit property in Waitsburg and were looking for a tenant for one of the units.
Well, just last night I learned they are selling. I spoke with him on the phone and set up a time to look at the property on Sunday at which point I will learn more about the property. Here's what I know now:
The asset:
They bought the property 15 years ago as a hotel, but instead of using it as such he converted it into 5 apartments:
It's a solid cinderblock building.
3 bed/1bath X3
2 bed/1bath X2
Each unit is currently occupied.
They each have a full kitchen, and their own washer and dryer, and a living room.
None of the units are separately metered.
They have window A/C units and baseboard heaters in the bedrooms, and Cadet 4000's in the living rooms.
I haven't yet seen the interior but it has a newer roof (~6 years), and new paint.
His numbers given over the phone:
Income:
$900 for each 3 bed
$850 for each 2 bed
$575 per month electric
$525 per month water/sewer/garbage
$200 insurance
$150/month taxes
$150/month maintenance
They own the property outright and are asking $255,000. They are flexible and willing to carry.
The market:
He says he never struggles to keep it rented (of course) and it cash flows well. My biggest fear is the neighborhood. Waitsburg is a cute, relatively safe community with a population of ~2000 consisting mostly of farmers, teachers, and office workers. There is a great high school and middle school, a general store, gas station, and a few restaurants. Walla Walla (20 miles south) is a booming market with a growing population of ~32000 with constant new construction and a few colleges. There is also a new pulp mill going in ~20 miles north which will employ several hundred people. There are no similar properties in Waitsburg to run comps on. In Walla Walla, $255k would probably be the going market value for a similar asset.
Summary: This would be my first deal. So what should I be focusing on asking this guy when I meet with him, discuss terms, and view the property? What should I look for, watch out for, and be aware of? Are there any red flags that my untrained eyes (and ears) are missing?
I know this is a lot of jumbled information, so thank you for your patience.
